Congressional Testimony Examined: Lawmakers Question Big Tech CEOs About Dealings With Competitors, Startups

When CEOs of four of the most valuable U.S. technology companies gave testimony before a congressional subcommittee Wednesday, many of the questions focused on topics pertinent to startups and the tech entrepreneurial ecosystem.

We examined coverage from the testimonies of Amazon’s Jeff Bezos, Apple’s Tim Cook, Facebook’s Mark Zuckerberg and Google’s Sundar Pichai and drew out some highlights.

Subscribe to the Crunchbase Daily

On fees collected by Amazon, Apple, etc. from outside sellers (many that are startups) for apps and goods:

Cook testified that Apple did not hold onto a dominant share of the smartphone market and was in “fierce competition” with rivals, CNBC reported. He also defended the 30 percent fee of digital transactions on the App Store, saying Apple’s fees are favorable to those charged by brick-and-mortar retailers.

“Apple’s commissions are comparable or lower than commissions charged by the majority of our competitors,” Cook said.

Lawmakers questioned Bezos about Amazon’s cut of sales from small merchants. Vox’s report on the testimony cited a study by the Institute for Local Self-Reliance that showed Amazon collected 30 percent in fees on average from a given sale in 2019, which was 19 percent higher than it collected five years ago.

Bezos defended that practice saying the increases translated into value for the sellers, but did not say whether small businesses could be successful on Amazon’s platform without giving the e-commerce marketplace larger portions of their earnings. 

On undercutting potential competitors by selling at a loss until they dominate a market:

Members of the subcommittee (specifically the House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law) highlighted instances in which the four companies appeared to have either acquired competitors to make themselves stronger or worked against competitors on their platforms, Wired reported.

The subcommittee presented internal emails that showed Amazon deliberately began selling diapers at a loss in order to price Diapers.com out of the market and force it to accept a takeover—after which Amazon raised its diaper prices.

Meanwhile, documents were introduced showing that Facebook founder Mark Zuckerberg “openly discussed buying Instagram and WhatsApp in order to keep them from eating into Facebook’s business.”

Cook was also questioned about Apple using its App Stores to block competition. Digital Trends reported that Cook pushed back, responding that millions of apps found success as part of the platform.

“If Apple is a gatekeeper,” he said, “what we’ve done is open the gate wider.”

On intrusively and excessively collecting data from businesses using their platform, including startups:

Rep. Pramila Jayapal (D-Wash.) questioned Bezos, who was testifying in front of Congress for the first time, about Amazon previously telling lawmakers that it does not use data from third-party sellers to give itself an advantage. She cited public reports that indicated the opposite, The Washington Post reported.

“What I can tell you is we have a policy against using seller-specific data to aid our private label business,” Bezos said. “But I can’t guarantee you that policy has never been violated.”

Bezos defended his company’s work with third-party sellers, but Jayapal went on to argue that Amazon’s data practices, as portrayed in public reports, make it difficult for small businesses to compete, Digital Trends reported.

“You can set the rules of the game for your competitors, but not have to follow them yourself,” she said.

Meanwhile, subcommittee chairman Rep. David N. Cicilline (D-R.I.) asked Google’s Pichai about a decades-old staff memo related to Yelp’s feud with Google where, in previous congressional testimony, Google was accused of shifting “from providing users the most relevant and high-quality information on the internet to providing users whatever would keep them on Google’s own properties for as long as possible, even if that means the information is false.” 

Cicilline also asked if Google uses surveillance of other websites to inform its own strategy,  CNBC reported.

“Just like other businesses, we try to understand trends from data which we can see and we use it to improve our product for our users,” Pichai said.

On acquisitions to eliminate competitors:

Zuckerberg was questioned about Facebook’s acquisition practices and if they were anti-competitive, according to NPR. The most prominent example the committee cited was Facebook’s $1 billion acquisition of Instagram in 2012 when the photo-sharing startup had just 13 employees. The committee pointed to emails between Zuckerberg and former Facebook CFO David Ebersman discussing buying competitors, arguing that the emails showed the social media giant wanted to acquire startups to “neutralize a potential competitor.”

“These businesses are nascent but the networks established, the brands are already meaningful, and if they grow to a large scale they could be very disruptive to us,” Zuckerberg wrote in the email. “Given that we think our own valuation is fairly aggressive and that we’re vulnerable in mobile, I’m curious if we should consider going after one or two of them. What do you think?”

In those emails, Ebersman was a bit hesitant, and responded to Zuckerberg with a list of potential reasons to acquire another company. Zuckerberg said buying Instagram or Path would be a combination of “neutralizing a competitor” and improving Facebook. 

After Facebook bought Instagram in 2012, Zuckerberg also responded to an employee who congratulated him on the deal and wrote back: “One reason people underestimate the importance of watching Google is that we can likely just always buy any competitive startups, but it’ll be a while before we can buy Google,” The Verge reported. The Verge has more on Zuckerberg’s emails and the Instagram deal here.

Illustration: Li-Anne Dias